A worldwide stock-market rout as August began, accentuated in European markets, reflected flashing red signals of the trans-Atlantic financial system in trouble.

Of most import is the collapse of Portugal's largest banking group, Espirito Santo. The last part of that group still standing, the commercial bank BES, plunged to a stock value of 11 cents and bond value of 43 cents on the dollar, before the Portuguese government suspended trading in them, "pending announcements." The $90 billion bank is finished, and the question remaining is whether the government will throw its bailout fund at BES, or more likely start a chaotic bail-in of both creditors and depositors to try to keep the bank open, Cyprus-style. French and Brazilian financial institutions are exposed to BES, especially, but so is Blackstone Group. European banking authorities will have a tense weekend.

In the United States and United Kingdom, an ominous drop in "junk bond" markets also started during this week. This debt bubble had zoomed up to $280 billion in 2013, tripling from 2012, and were growing even faster this year. Now there has been a sudden three-week sell-off of about $6 billion, only a couple of percent deflation, but a potential prick which could explode the bubble.

U.S. stock markets were "calmed" somewhat by the Labor Department issuing a mediocre report on July employment in the United States; since fewer than "expected" jobs were created and wage growth fell to below 2% a year, speculators took heart that the Federal Reserve could be counted on for zero interest rates for quite a while longer.

Note former Bank for International Settlements chief economist William White's warning interview, reported in the Aug. 1 Morning Briefing, that that central bank zero-interest money-printing policy is what has built in the oncoming crash "worse than 2008."